Bank of England keeps interest rates at a record low

The Bank of England has held interest rates at a record low and kept the size
of its money-printing programme at £175bn, as it seeks to shore up the
economy's emergence from recession.

The Bank of England is expected to keep interest rates at a record low of 0.5pc on Thursday

12:09PM BST 08 Oct 2009

The decision by the Bank's Monetary Policy Committee to keep rates at 0.5pc was widely expected by City economists and most now expect a decision by the MPC on whether to expand its radical programme of printing money, known as quantitative easing, in November when it will have its latest inflation and growth forecasts.

Although many now believe the economy stopped contracting in the third quarter of the year, there's little optimism among economists about the strength of the any recovery. The British Chambers of Commerce (BCC) is calling for the MPC to increase the scale of its QE programme - designed to increase the amount of money in the economy - to £200bn to help bolster any recovery.

"The Bank of England is in wait and see mode," said Graeme Leach, chief economist at the Institute of Directors. "The Bank will be very aware that just as the private sector recession draws to an end, the public sector recession will be only just beginning."

The Bank has slashed interest rates from 5.75pc a year ago - their lowest level in more than three centuries - in a bid to prevent the economy tipping into a full-blown recession. Mervyn King, the Bank of England Governor, has indicated that interest rates are unlikely to be raised in the next few months to give the recovery a chance to take hold.

Earlier this week Australia became the first major economyto raise interest rates in the belief that a recovery is strengthening. Australia managed to avoid tumbling into recession and Britain faces bigger headwinds over the next year, with cuts in Government spending adding to the financial pressure on the consumer.

Howard Archer, chief UK economist at IHS Global Insight, said that interest rates were likely to remain on hold until 'at least the final months of 2010'.